Logo
Munich Personal RePEc Archive

Bank’s choice of loan portfolio under high regulation – example of Croatia

Vidakovic, Neven (2015): Bank’s choice of loan portfolio under high regulation – example of Croatia.

[thumbnail of MPRA_paper_63929.pdf]
Preview
PDF
MPRA_paper_63929.pdf

Download (416kB) | Preview

Abstract

This paper creates a mathematical model in which the banks are faced with two optimization problems. The first optimization problem is how to optimize their behavior in order to maximize profits. The second optimization is how to optimize the structure of liabilities in order to have minimum regulation. The regulatory regime is imposed by the central bank. This paper investigates the behavior of banks when faced with high regulation and provides a theoretical framework for analysis of the impact of high regulation on the choice of the bank’s portfolio structure. The model shows the banks have a learning framework in which the banks learn the central bank’s true model and adjust their credit policies to existing regulatory regime. However this adjustment also creates changes in the choice of credit.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.